Moderating inflation brings little comfort to retirees, whose Social Security benefits are failing to keep pace with their mounting expenses, according to a new survey.
Consumer prices rose 6.4% in January over the same period last year, a slight deceleration from last month’s rate. At the same time, older adults received a historic 8.7% cost-of-living adjustment to their Social Security benefits for 2023. But instead of having extra cash on hand, some older adults are trying to dig themselves out of a financial hole.
Over the three years ending last December, Social Security benefits have fallen short of inflation by about $1,054 on average, according to a study released Tuesday by The Senior Citizens League. Put another way, the average benefit would have needed to be at least $44 a month higher in 2021 and 2022 for retirees to keep up with rising prices. (Inflation wasn’t a big factor during the first year of the pandemic.)
“Will older retirees be able to recover?” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League and author of the report.
A new survey by the organization suggests that may be difficult. About half of respondents reported that their household costs in 2022 rose by more than 8.7%, while the cost-of-living adjustment for last year was just 5.9%. Most respondents said they didn’t expect to be able to catch up this year. Prices for essentials like food and energy rose in 2022 as stock and bond prices fell, forcing many retirees to withdraw more money from their declining portfolios to make ends meet.
Adding to the squeeze, a growing number of older taxpayers may find they have to pay tax on part of their Social Security benefits. That’s because the income thresholds that subject benefits to taxation were set in 1983 at $25,000 for individuals and $32,000 for married couples. Had those amounts been indexed for inflation, they would today be about $73,000 for singles and $93,200 for couples, according to The Senior Citizens League.
About one in five respondents to the recent survey worried they may be subject to a tax on their Social Security benefits for the first time this tax season.
Write to Elizabeth O’Brien at firstname.lastname@example.org